At Enable our independent Financial Advisors aim to help you make the most of your savings. Saving into a pension is the most tax-efficient method of putting money aside for retirement. There are three main reasons that make pensions tax efficient:
The first being investments in a pension are fully protected from potential capital gains tax charges and there is no additional income tax to pay on dividends or interest, secondly from the age of 55, an individual can normally take up to 25% of their pension fund as a tax-free lump sum, and thirdly tax relief is available on contributions at an individual's marginal rate of tax up to 100% of UK earnings or £50,000 (whatever amount is lower).
The tax efficient of a pension from a contributions perspective of course depends on an individual's personal circumstances. The basic rule is that individuals can receive tax relief at their marginal rate of income tax on contributions up to 100% of their earnings or £50,000. It is however possible to contribute in excess of the £50,000 annual allowance by using carry forward rules. The rules allow individuals to carry forward any unused annual allowance from the three previous tax years. This means some individuals could contribute up to £200,000 in the current tax year assuming they have the earnings to support it, importantly; contributions cannot exceed 100% of earnings in the year in which the contribution is made. Enable’s IFA’s can help you with the detail.
No comments:
Post a Comment